Президент Индийской ассоциации производителей картонной упаковки: отрасль производства картонной упаковки сталкивается не с вызовом, а с вопросом выживания

Rising input costs and supply chain disruptions are having a negative impact on India's corrugated packaging industry, thereby affecting its revenue. The energy crisis, economic tensions, rising freight and fuel rates, and the goods and services tax levied on corrugated cartons are continuing to hurt the already struggling corrugated packaging industry.

"What the industry is facing now is not just a challenge, but a question of survival," said Sanjay Rajgarhia, President of the Indian Corrugated Case Manufacturers Association (ICCMA). "In the past three months, our overall costs have increased by 30%. Between January 2020 and March this year, raw material costs for corrugated carton manufacturers rose by at least 70%. On top of that, paper mills are raising prices every week, while carton manufacturers must wait for customers to agree and approve the increase."

Mainly involving SMEs

At present, the corrugated carton industry across India has more than 400 automated production enterprises and more than 10,000 semi-automated production enterprises, mainly micro, small and medium-sized enterprises. If some factories close, more than 700,000 employees would be affected, which could have a very negative impact on the economy.

Corrugated cartons play a vital role in India's domestic supply chain and exports. In addition to recycled brown cartons, the industry also uses raw materials such as kraft paper, waste paper and waste trimmings. Kirit Modi, Honorary President of ICCMA, said: "Since January 2020, the prices of the main raw materials for kraft paper mills, such as waste trimmings and waste paper, have more than tripled."

Waste paper and waste trimmings that were quoted at less than USD 100 per tonne before January 2020 now cost USD 330. Sandeep Wadhwa, President of ICCMA, said: "Container shortages and higher freight rates have added fuel to the fire."

According to reports, earlier the cost of shipping a container from India to the United States was USD 2,000-2,500, and it has now soared to USD 12,000, while freight rates to destinations such as West Asia have risen sevenfold and now stand at USD 1,500. On the other hand, ocean freight rates have risen by more than 300% year on year.

"Coal prices have risen from 3,000 rupees per tonne to nearly 14,000 rupees per tonne now. We need at least one tonne of coal to produce one tonne of paper at a plant with a cogeneration unit," Rajgarhia said.

Wadhwa said the energy crisis has had a huge impact on corrugated carton manufacturers. With factories operating on zero inventory and crude oil prices above USD 80 per barrel, the energy crisis has almost begun. "Electricity prices will rise further, and everything seems to be getting out of control," Wadhwa said.

Harish Madan, Vice President of ICCMA, said: "The spiraling rise in the prices of all commodities and the threefold increase in coal prices have left the carton manufacturing industry struggling to survive."

"All commodities are in an upward cycle, and the costs of other inputs such as kraft paper, adhesives and starch, ink and steel are continuing to increase. In some cases, prices have even risen by 40%," Modi said.

Globally, coal prices have risen by nearly 190% since the beginning of this year, while steel prices have risen by 32%. Starch prices have risen because corn prices increased by 10% during this period.

Difficult to raise prices for customers

"We have notified our customers through circulars about the situation we face. But due to the rise in the commodity market, they are facing similar problems," Wadhwa said.

Rajgarhia said the problem facing Indian manufacturers is that the country is short of fiber and depends on imports. At the same time, because of soaring prices, the industry cannot even pass on half of the extra costs it has to bear.

When asked about exports of kraft paper to China, Modi said shipments were not as high as six months ago. "If this trend continues, we will get into even bigger trouble," he said.

As China began importing large quantities of kraft paper to meet its domestic demand, this also became one of the main reasons for the surge in domestic paper prices in India. Before the ban on waste paper imports was issued, China had been importing waste paper from around the world. This included all the waste paper generated in the United States, Europe and other developed countries, which was mainly recycled to make paper.

In view of the waste import ban, Chinese paper mills turned to importing kraft paper from India. Kraft paper is recycled paper, and Chinese mills use it as a source of pulp or fiber to make paper.

Higher excise tax

In addition to these problems, the corrugated carton industry also faces higher goods and services tax (GST) levies. From October 1, the excise tax on corrugated cartons increased from 12% to 18%.

"This will put further pressure on our working capital, because we must immediately provide credit to customers. This poses a huge challenge to our working capital, and we also have to pay interest to banks for it," Wadhwa said. "The carton industry is currently like being in a long, dark tunnel with no light in sight."

"The biggest challenge facing the corrugated carton industry is the lag in price execution. ICCMA spokesperson Vikas Goyal said that while it is dynamic in the case of purchasing, in the case of sales it is either phased in or at contract rates."

The problem for the industry is that it is driven by paper mills, which announce price increases via SMS or WhatsApp messages with immediate effect. On the other hand, customers are mainly brand companies, and they need to be contacted to request approval for price increases so that the rates on orders can be revised.

Paper prices are rising every week

Goyal said that while paper mills raise prices every week, carton manufacturers must wait for customers to agree and approve the increase. "Until then, we have to pay out of our own pockets, which hurts us enormously because the cost increases are so large," he said.

In the past, this situation happened once, and the industry bore the brunt of it. But now, with the sharp increase in the frequency of price increases, customers should also consider how to correct this problem, Goyal said. "We need immediate corresponding price increases to remain viable."

Madan said the industry has very little added value, so input costs are sometimes higher than sales prices.

As of now, the industry believes there is no respite and no way out. "Input prices are expected to remain firm until winter ends in Europe and other Western countries, because demand for energy will increase. We must accept this situation and work hard to overcome it," Wadhwa said.

——This article is reprinted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-378650.html